Technicals
WHAT LIES AHEAD : NEAR-TERM PICTURE
SPOT NIFTY : After registering a new lifetime high on June 3, the Nifty (spot) lost 81 points in the month of June. It retraced more than 50 per cent of the fall of 478 points from the top. It is testing the support of 11625 level, which is near to the May 20 low, and is also a gap area. The level of 11590 is a critical support. Six days of trading between 11843-11625 has broken out on Wednesday. But on Thursday, it struggled to sustain above the breakout level and came back within the range and formed a shooting star kind of pattern. Even after 50 per cent retracement of the fall, the indicators are not giving any confirmation to the rally to continue. The fall on Thursday afternoon with higher volumes is a sign of distribution. The two days of huge rallies look like short covering and as expiry phenomenon. A majority of the stocks are trading below the 50-DMA and most of the largecaps are showing some signs of weakness. In this scenario, we need to watch the market action from Friday onwards for a clear understanding of the direction.
The market is witnessing profit-booking on every rise and buying support at the bottom of the range. As the Union budget is just 6 trading sessions away, the market may not take a decisive direction before the budget. The budget may act as a major trigger for the market direction. Have a positive bias above 11845 and bearish bias below 11600. As long as Nifty is within the range, follow a neutral stance.
NIFTY DERIVATIVES: Nifty June future lost 103 points since May 30 close. After 487.70-point fall from the June 3 high, it is consolidating within the 200-point range. The breakout on Wednesday due to short-covering did not sustain at the higher levels. The rollovers have increased above the three-month average to 67.58, which indicates the continuation of the trend. The Put-Call Ratio (PCR) is still at the higher side at 1.35. The Open Interest (OI)-wise PCR for the July 4 expiry is also at the higher side with 1.06. As the next weekly expiry is just a day before the Union budget, the OI is little lower side. The highest Call OI is at 12,000 strike and the highest Put OI is at 11800. 12100 and 11700 strikes also have the next highest OI in Calls and Puts, respectively. From 11750 to 12300 strike, Calls witnessed short build-up. Other than 12100 strike from 11400 to 12100 strike, Puts also witnessed the short build-up. The max pain is placed at 11850 for July 4 expiry.
STOCK STRATEGY
AVENUE SUPERMARTS ......................... BUY .................... CMP Rs. 1390.95
BSE Code ..Rs.540376
Target 1 ..Rs.1484
Target 2 ..Rs.1510
Stoploss ..Rs.1330(CLS)
✓ Current Observation: Technically, the stock closed above the 100-EMA with huge volumes in the last two days. The stock has also broken out of the 45-day ascending triangle with a faster retracement. The price closed near the downward resistance line.
✓ The RSI entered the bullish zone after a long zone of sideways movement and it has broken out of an ascending triangle similar to the price.
✓ The MACD line is above the zero line for the past seven trading sessions and above the signal line for the past 29 trading sessions. The sideways action for the last one month forces the Bollinger bands to become narrowed. With the breakout of the ascending triangle, the bands are expanding. The ADX is above +DI and +DI is above the -DI, which shows the strength in the trend.
✓ The ascending triangle breakout target is placed at Rs 1484-1510. The target may be reached in the short-medium term. Any kind of dip in the stock is an opportunity to buy. Buy this stock at Rs 1390.95, with a stop loss of Rs 1330.
REVIEW OF STOCK STRATEGY
We had recommended our readers to buy the stock of Hexaware Technologies at Rs 379.85 in issue no. 35 (dated June 24, 2019). Post our recommendation, the stock moved higher in line with our expectation and went on to touch the level of around Rs 455.70. We had given a ‘Book Profit’ message at the level of Rs 394.40 through our SMS service on June 21, 2019. Thus, investors who had taken positions according to this strategy would have made decent profit.